Comments on 'Is Academic Macroeconomics Flourishing?'TypePad2012-12-29T22:36:24ZMark Thomahttp://economistsview.typepad.com/economistsview/tag:typepad.com,2003:http://economistsview.typepad.com/economistsview/2012/12/is-academic-macroeconomics-flourishing/comments/atom.xml/Edward Lambert commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c35243dfc970b2012-12-30T20:33:53Z2012-12-30T20:33:53ZEdward LambertYou make a very good point... and the equation looks at the data and says that there must be a...<p>You make a very good point... and the equation looks at the data and says that there must be a constant to labor share expressing as effective demand. I haven&#39;t tried to figure out that constant yet.</p>
<p>One thing to keep in mind... when the labor share constraint is for example 72%. That number comes from the data. (graph #1 in the paper) It represents &quot;effective demand&quot; that determines utilization of the factors of production, labor and capital, for final product consumption.</p>Mark A. Sadowski commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c35236c7a970b2012-12-30T18:09:43Z2012-12-30T18:09:43ZMark A. Sadowskihttp://thefaintofheart.wordpress.com/2012/12/30/needed-for-2013-a-paradigm-change/ December 30, 2012 Needed for 2013, a paradigm change By Marcus Nunes "Simon Wren Lewis joins the debate on...<p><a href="http://thefaintofheart.wordpress.com/2012/12/30/needed-for-2013-a-paradigm-change/" rel="nofollow">http://thefaintofheart.wordpress.com/2012/12/30/needed-for-2013-a-paradigm-change/</a></p>
<p>December 30, 2012</p>
<p>Needed for 2013, a paradigm change<br />
By Marcus Nunes</p>
<p>&quot;Simon Wren Lewis joins the debate on the State of Macro.</p>
<p><a href="http://mainlymacro.blogspot.com.br/2012/12/is-academic-macroeconomics-flourishing.html" rel="nofollow">http://mainlymacro.blogspot.com.br/2012/12/is-academic-macroeconomics-flourishing.html</a></p>
<p>&quot;...Is this because the evidence in macroeconomics is so unclear that it becomes very difficult to judge different theories? I think the inexact nature of economics is a necessary condition for the lack of an academic consensus in macro, but it is not sufficient. (Mark Thoma has a recent post on this.) Consider monetary policy. I would argue that we have made great progress in both the analysis and practice of monetary policy over the last forty years. One important reason for that progress is the existence of a group that is often neglected – macroeconomists working in central banks.</p>
<p>Unlike their academic counterparts, the primary goal of these economists is not to innovate, but to examine the evidence and see what ideas work. The framework that most of these economists find most helpful is the New NeoClassical Synthesis, or equivalently New Keynesian theory. As a result, it has become the dominant paradigm in analysing monetary policy.&quot;</p>
<p>According to Scott Sumner the dominant paradigm is not very useful, in fact quite useless</p>
<p><a href="http://www.themoneyillusion.com/?p=18274" rel="nofollow">http://www.themoneyillusion.com/?p=18274</a></p>
<p>&quot;Of course private industry doesn’t use DSGE models, they are useless. The macroeconomy is incredibly complex; I recall McCallum once listing 10 types of wage/price stickiness. Most models assume one type. And most models fail to incorporate AD/AS interaction, as when adverse demand shocks reduce AS by leading policy-makers to extend unemployment insurance from 26 weeks to 99 weeks. Most don’t know how to identify monetary policy shocks. The DSGE models are incredibly simplistic. I basically “retired” from mainstream macro several decades ago when I saw where things were going, and pursued my own research interests...&quot;</p>
<p>&quot;...The real problem with mainstream macroeconomists is that they are too influenced by “framing effects” and had a giant brain freeze in late 2008. Virtually the entire profession forgot that the central bank has the ability and responsibility to provide an adequate level of AD. Only a fringe group of Aspergy-types looked beyond the framing effects, saw the real problem, and saw what needed to be done. But the profession (freshwater and saltwater) failed us. The central banks do pretty much what a consensus of elite macroeconomists think they should be doing. The profession “owns” the Great Recession, or at least that portion of it caused by inadequate AD. The profession has had the tools all along, but doesn’t seem to know how or when to use them. Only 4 years later is it starting to wake up.&quot;</p>Goldilocksisableachblonde commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f513eea970c2012-12-30T15:09:16Z2012-12-30T15:09:16ZGoldilocksisableachblondeThanks for that. This will make it easier for those of us trying to follow along. One thing you might...<p>Thanks for that. This will make it easier for those of us trying to follow along.</p>
<p>One thing you might want to examine is the changing composition of the labor share , rather than just the level. After all , when income share moves from labor to capital , ultimately it still ends up in the pockets of individuals somewhere , via capital gains , dividends , etc. So , the binding constraint might be that fraction of labor share that ends up in the pockets of the masses , say the bottom 90% or 95%. And we know that the share going to the bottom 90% of wage earners has been shrinking in the same period of time that labor share overall has been shrinking. You might be able to isolate a more revealing labor share metric by focusing on that &quot;shriveling 90%&quot;. </p>paine commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f50af99970c2012-12-30T13:15:19Z2012-12-30T13:15:19Zpainehttp://earthmart.blogspot.com/the usual run of contending elites stop only long enough to feed the mob what each faction of the elites...<p>the usual run of contending elites <br />
stop only long enough<br />
to feed the mob <br />
what each faction of the elites <br />
figure most effectively controls the mob&#39;s collective mind </p>
<p>hence the zero science taboos and such</p>
<p>the resort to analogy and magic thinking </p>
<p>our great popular enlighteners ?</p>
<p>more like high priests of rival cults</p>
<p>communicating with each other in a sacred language </p>
<p>they write in greek </p>
<p>they <br />
perform obscure runic calculations <br />
in this holy cipher <br />
and they announce their conclusions <br />
to the mob in oracular double talk </p>
<p> </p>paine commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c3521e087970b2012-12-30T13:07:46Z2012-12-30T13:07:46Zpainehttp://earthmart.blogspot.com/"US fans of a more active fiscal policy are quick to criticize the Federal Reserve for being too undemocratic" its...<p>&quot;US fans of a more active fiscal policy are quick to criticize the Federal Reserve for being too undemocratic&quot;</p>
<p><br />
its non democratic <br />
like our federal court system </p>
<p></p>
<p>&quot; failing to note that it is the political body that is most democratic in conception which has effectively put active fiscal policy beyond our reach&quot;</p>
<p>you confuse policy with pwer and authority to make and execute policy </p>
<p>oviously a democratic institution like the House<br />
can pursue any policy path <br />
even the most ruinous of policy paths<br />
to the majority of citizen households </p>
<p>the notion a benign crew <br />
of elite economists <br />
say from MIT <br />
installed atop the FED<br />
could act better FOR the people<br />
then the people&#39;s own elected House <br />
is a devils bargain</p>
<p>that elite could as easily ...in fact here more easily<br />
come from ...Chicago !</p>
<p>to had fiscal macro policy to an analgue of the FED <br />
say a FISC as ned phelps use to call it <br />
would be another devil&#39;s bargain<br />
even if we got an initial burst of benign activism<br />
that worked briliantly and astonished the nation</p>
<p>nope</p>
<p>we have to gain control of the House <br />
and thru the House re gain control <br />
of FED policy <br />
a set up <br />
like we had in the 40&#39;s <br />
perhaps </p>
<p>we need a new humphrey hawkins <br />
full employment act that organizes<br />
all the macro instruments <br />
into a unified system<br />
of output pricing and employment maintenance </p>
<p>right now the FED can scotch fiscal activism </p>
<p>this is an absurdity</p>
<p>checks and balances ?</p>
<p>not over a continuous process<br />
like macro stablization policy </p>
<p>we need a cmpound set of algorithms draft up and empowwred by our democratic heart the House </p>
<p>ya ya <br />
first<br />
the people have to learn <br />
&quot;how a modern national economy actually works&quot;</p>
<p>we got a long haul ahead of us on that </p>
<p>at this rate</p>
<p>why we go backwards<br />
as mch as forwards on this</p>
<p>the advances between 1945 and 1963 <br />
were reversed between 1975 and 1993 <br />
a key point</p>
<p>only the elites even had the correct isuse in hand to debate</p>
<p>the populace was left to their homely analogies<br />
to a farm or a shop </p>
<p><br />
--------------------------------<br />
the institution as presently authorized by law<br />
--1951-- is self governing </p>
<p> congress could re aquire direct control<br />
over monetary policy<br />
by a simple change in the law <br />
this is quite unlike the fedral court system <br />
the courts operate independently<br />
as creatures not of congress<br />
but of the constitution </p>Mike commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f4fa69f970c2012-12-30T09:36:40Z2012-12-30T09:36:40ZMikeLets see. We need to restore public employment and invest into America. What school teaches this right now? Then after...<p>Lets see. We need to restore public employment and invest into America. </p>
<p>What school teaches this right now?</p>
<p>Then after this, we need policies that promote the middle class and cut back on rent seeking. </p>
<p>No academic economist will tackle these issues. </p>Edward Lambert commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f4ec410970c2012-12-30T06:16:55Z2012-12-30T06:16:55ZEdward LambertAnd so I add my theories to the mix... I uploaded a paper with a series of UT equation graphs...<p>And so I add my theories to the mix... <br />
I uploaded a paper with a series of UT equation graphs (20) with explanations. <br />
The last graphs are the most recent. The last one was finalized today. It shows that my UT equation may be an improvement to the Taylor rule.</p>
<p>I leave my work in your hands knowing that putting labor share of income squarely in the mix is not just good economics, it is good ideology.</p>
<p><a href="https://docs.google.com/open?id=0BzqyF_-6xLVEZ0FlVHZSaUd1bVU" rel="nofollow">https://docs.google.com/open?id=0BzqyF_-6xLVEZ0FlVHZSaUd1bVU</a></p>Mark A. Sadowski commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f4d9e52970c2012-12-30T02:06:56Z2012-12-30T02:06:56ZMark A. Sadowski"Mishkin provided key evidence against these models through his academic work (see, for example, his book A Rational Expectations Approach...<p>&quot;Mishkin provided key evidence against these models through his academic work (see, for example, his book A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient-Markets Models), so I am not as convinced as Simon Wren-Lewis that the difference between monetary and fiscal policy is due solely to the existence of technocratic, mostly non-ideological central bank economists letting the evidence take them where it may. That certainly mattered, but is seems there was more to it than this.&quot;</p>
<p>A Rational Expectations Approach to Macroeconometrics: Testing Policy Ineffectiveness and Efficient-Markets Models<br />
Frederic Mishkin<br />
1983, University of Chicago Press<br />
<br />
<a href="http://www.nber.org/books/mish83-1" rel="nofollow">http://www.nber.org/books/mish83-1</a></p>
<p>Chapter 6</p>
<p><a href="http://www.nber.org/chapters/c10248.pdf" rel="nofollow">http://www.nber.org/chapters/c10248.pdf</a></p>
<p>Introduction:</p>
<p>&quot;Recent theorizing has focused on business cycle models that incorporate features of the natural rate model of Friedman (1968) and Phelps (1967) with the assumption that expectations are rational in the sense of Muth (1961). An important neutrality result from this research (Lucas 1973; Sargent and Wallace 1975) is that anticipated changes in aggregate demand policy will have been taken into account already in the behavior of economic agents and will evoke no further output or employment response. Therefore, deterministic, feedback policy rules will have no effect on output fluctuations in the economy. This policy ineffectiveness proposition of what Modigliani (1977) has dubbed the Macro Rational Expectations (MRE) hypothesis runs counter to much previous macroeconomic theorizing (and to views prevailing in policymaking circles). This proposition is of such importance that it demands a wide range of empirical research for verification or refutation...&quot;</p>
<p>Conclusion:</p>
<p>&quot;This chapter asks the question, &quot;Does Anticipated Aggregate Demand Policy Matter?&quot; The reported findings answer this question with a strong &quot;yes&quot;: anticipated policy does seem to matter. </p>
<p>The most important results are those with money growth as the aggregate demand variable. These results strongly reject the neutrality proposition of the MRE hypothesis. Furthermore, contrary to the implications of the MRE hypothesis, unanticipated movements in monetary policy do not have a larger impact on output and unemployment than anticipated movements. The other proposition embodied in the MRE hypothesis, that expectations are rational, fares better in the empirical tests here. When the MRE component hypotheses of rationality and neutrality are tested jointly, strong rejections occur in both the output and unemployment models. In one case, the probability of finding the same or higher value of the likelihood ratio statistic under the null hypothesis is only 1 in 10,000. The crucial factor in the unfavorable findings on the MRE hypothesis appears to be the inclusion of long lags in the output and unemployment equations. The results here thus give further impetus to theoretical research (see Blinder&#39;s 1980 discussion) that is currently exploring why long lags may exist in rational expectations models of the business cycle. </p>
<p>Models with longer lags are less restrictive. The rejections in these models are therefore very damaging to earlier evidence in support of the MRE hypothesis obtained from models with shorter lags. As discussed in Chapter 2, the only cost to estimating the models with longer lags is a potential decrease in the power of the test statistics. Rejections in this case are thus even more telling. The failure to reject the MRE hypothesis in shorter lag models appears to be the result of an overly restrictive specification that leads to inconsistent parameter estimates and incorrect test statistics...&quot;</p>Mark A. Sadowski commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017d3f4d8a52970c2012-12-30T01:50:11Z2012-12-30T01:50:11ZMark A. Sadowski"At first, the evidence seemed to support these models (e.g. Barro's empirical work), but as the evidence accumulated it eventually...<p>&quot;At first, the evidence seemed to support these models (e.g. Barro&#39;s empirical work), but as the evidence accumulated it eventually became clear that this prediction was wrong.&quot;</p>
<p>For example:</p>
<p>Barro, Robert J. (1977). &quot;Unanticipated Money Growth and Unemployment in the United States&quot;. American Economic Review 67 (2): 101–115.</p>
<p><a href="http://www.jstor.org/discover/10.2307/1807224?uid=3739592&uid=2129&uid=2134&uid=2&uid=70&uid=4&uid=3739256&sid=21101600914927" rel="nofollow">http://www.jstor.org/discover/10.2307/1807224?uid=3739592&amp;uid=2129&amp;uid=2134&amp;uid=2&amp;uid=70&amp;uid=4&amp;uid=3739256&amp;sid=21101600914927</a></p>
<p>From the conclusion:</p>
<p>&quot;The starting point for this study was the hypothesis that only unanticipated movements in money would affect economic activity. That hypothesis was quantified by interpreting anticipated money growth as the amount that could have been predicted based on the historical relation between money growth and a specified set of explanatory variables. For the United States from 1941 to 1973 these variables in included a measure of federal expenditure relative to normal, a lagged unemployment rate, and two annual lag values of money growth. Unanticipated money growth was then measured as actual growth less the amount obtained from this predictive relationship. The current and two annual lag values of unanticipated money growth were shown to have considerable explanatory value for unemployment. Further, some statistical tests confirmed the underlying hypothesis that actual money growth was irrelevant for unemployment, given the values of unanticipated money growth.&quot;</p>Mark A. Sadowski commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017ee6c1bf70970d2012-12-30T00:23:29Z2012-12-30T00:23:29ZMark A. Sadowski"This is why I think there should be at least a strong role for a non-political institution involved in the...<p>&quot;This is why I think there should be at least a strong role for a non-political institution involved in the creation of fiscal policy, at least in an advisory/analysis role.&quot;</p>
<p>My biggest reservation about US fiscal policy is that it is in the hands of a Republican controlled House of Representatives. I say this as we set to go over the &quot;fiscal cliff&quot; in a few days. </p>
<p>US fans of a more active fiscal policy are quick to criticize the Federal Reserve for being too undemocratic, failing to note that it is the political body that is most democratic in conception which has effectively put active fiscal policy beyond our reach. </p>
<p>P.S. CPB produces a World Industrial Production Index (WIPI) which is to my knowedge totally unique:</p>
<p><a href="http://www.cpb.nl/en" rel="nofollow">http://www.cpb.nl/en</a></p>donna commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017ee6c17ded970d2012-12-29T23:28:03Z2012-12-29T23:28:03Zdonnahttp://www.wordpress.comECONOMIST ..technical..with basic one theory who believes ..PK theorycal is right ..and i understand .he trying to put all in...<p>ECONOMIST ..technical..with basic one theory who believes ..PK theorycal is right ..and i understand .he trying to put all in mind NK is the best for follow .<br />
for many thing;s i am agree ..i am agree with M.THOMA TOO .<br />
i am not academic but in logice mathematical i have to say all most are wrong .<br />
if we make calculation (never by mind) but by penn and paper ..we see how we wolk..<br />
is easy to say 1+1=2 ...but we don&#39;t know is 2or 1 ...if dosent make cal..<br />
anyway ..the Economist profession is the most imprtant for the&#39;&#39; poria&#39;&#39;to one gv (state)<br />
AND just ACADEMIC TECHNOCRAT..<br />
not political ..(never happening)eh..we all have one ideology ..so we allways make mistake and the bad is we don&#39;t learned ..every business have one start and one finish with out speciffic time (so cycle)<br />
I LIKE THE ARTICLE <br />
THANK YOU</p>Christiaan Hofman commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c351e1d1e970b2012-12-29T23:25:14Z2012-12-29T23:25:20ZChristiaan Hofmanhttp://profile.typepad.com/christiaanhofmanFor fiscal policy there certainly exist a large demand for the type of information that confirms ideology. This is a...<p>For fiscal policy there certainly exist a large demand for the type of information that confirms ideology. This is a direct result of the inevitable ideological nature of the people who are responsible for setting it. This is why I think there should be at least a strong role for a non-political institution involved in the creation of fiscal policy, at least in an advisory/analysis role. But that is not enough, it should probably be a bit stronger than just advisory. I say that because here in the Netherlands we have the CPB, one of the strongest non-political economic advisory and analysis institutions of its kind in the world, but politics still has created a completely backward fiscal policy (we had about 4-5% unemployment before the last government in 2010 started austerity, and now we&#39;re moving towards 7% unemployment and a triple dip. The CPB&#39;s belated and too weak warnings against austerity are completely ignored.)</p>eightnine2718281828mu5 commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c351e02a8970b2012-12-29T23:03:56Z2012-12-29T23:03:56Zeightnine2718281828mu5'The ass arrived, beautiful, and most brave.'<p>&#39;The ass arrived, beautiful, and most brave.&#39;<br />
</p>Goldilocksisableachblonde commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017ee6c15203970d2012-12-29T22:52:09Z2012-12-29T22:52:09ZGoldilocksisableachblondeExcellent. The end of the year is the ideal time to rationalize away one's failures in the past. This practice...<p>Excellent.</p>
<p>The end of the year is the ideal time to rationalize away one&#39;s failures in the past.</p>
<p>This practice leads to a greater likelihood of success in the New Year , or so we&#39;re left to hope , anyway.</p>
<p> </p>anne commented on ''Is Academic Macroeconomics Flourishing?''tag:typepad.com,2003:6a00d83451b33869e2017c351defdc970b2012-12-29T22:47:29Z2012-12-29T22:47:29ZanneNicely done.<p>Nicely done.</p>